Health Care

Jackson Health bet its bond money on attracting insured patients. Will the plan work?

With about $100 million left to spend out of an $830 million bond approved by voters in 2013, the Jackson Health System has already funneled the bulk of its public cash infusion into modernizing its buildings and constructing new, marquee facilities.

The plan is to compete for more insured patients in a crowded and cutthroat Miami healthcare market, and the public health system’s bets have essentially been made.

As of September, the Public Health Trust — the board that manages the public health system — has approved about $725 million in spending out of the $830 million bond passed by Miami-Dade taxpayers in 2013. More than half of that amount, about $470 million, has already been spent by Jackson and reimbursed by the county.

That bond money is going toward improving the existing Jackson hospital network — modernizing elevators, upgrading equipment and renovating buildings. It’s also being used to build new marquee facilities: $54.5 million will go toward construction of the Jackson West Medical Center in Doral, and $117 million will go toward the Christine E. Lynn Rehabilitation Center for the Miami Project to Cure Paralysis at UHealth/Jackson Memorial.

Sal Barbera, a former healthcare executive who now teaches healthcare administration at Florida Atlantic University, said the strategy of attempting to bring in more insured patients is a sound one, but reshaping Jackson’s image will be a continuing challenge for the safety-net system.

“What they’re trying to do is the right thing to do,” Barbera said. “Whether they can pull it off or not, that remains to be seen. The Jackson brand is going to be challenging, because you’re going up against [Baptist Health South Florida] and some real formidable providers in town.”

Jackson serves the bulk of uninsured and under-insured patients in Miami-Dade County, while also caring for county inmates, which is why it receives hundreds of million of dollars in taxpayer funding from property taxes and a half-penny sales tax — both of which have been bringing in more revenue than usual thanks to a strong local economy.

“Obviously, we’ve got a corner on the uninsured market,” Jackson chief financial officer Mark Knight said. “We’ve got to generate some profitability to support that mission.”

But for the new facilities, profits are likely several years off. In the meantime, the hospital’s budget is vulnerable. Carlos Migoya, Jackson Health’s president and chief executive officer, emphasized that in a recent memo to Florida lawmakers, saying, “Unlike private, for-profit hospital systems, Jackson operates on razor-thin margins at all times.”

Though the Jackson West Medical Center is set to open in Doral by October 2020, Knight said it would take about five years for the new medical campus to become profitable. Knight said the rehabilitation center will have a quicker path to profitability — about two to three years.

The years until profitability represent a transition period for the public hospital system, Barbera, the former healthcare executive, said. Jackson’s main challenge, he added, will be to keep finding ways to save cash while waiting for its new facilities to start bringing in profits.

“Based on their own projections, they’re going to be teetering on a tightrope for several years until the revenue sources they’re planning on come to fruition,” Barbera said.

Unlike building new facilities, upgrades to existing ones don’t necessarily bring in more revenue. But Knight said he is optimistic that Jackson West and the new rehabilitation center will provide a significant return.

For example, Jackson’s existing rehabilitation center, Knight said, has already seen a boost in patients in the ramp-up to construction of a new state-of-the-art facility. That project, he added, is likely to become a “cash cow” for the hospital network.

“That is a no-brainer,” Knight said. “All projections and outside consultants have indicated that it’s going to be very positive.”

Isa Nunez, vice president of facilities, design and construction at Jackson Health System, updates the Public Health Trust on bond spending during a committee meeting at Jackson Memorial Hospital on October 30, 2019. The public health system has spent about $471.5 million since the bond program began. Ben Conarck, Miami Herald

In the latest bond meeting last week, the Public Health Trust approved $266,000 for renovations and upgrades at the Jackson North Medical Center and $43 million in spending at Jackson West.

At that meeting, Martha Baker, a registered nurse at Jackson and president of Service Employees International Union Local 1991 — the union representing Jackson doctors and nurses — said she wasn’t sure the health system was spending enough on improving access to primary care in Miami’s most challenged areas.

Baker stressed that the Public Health Trust should consider that when determining how to spend the remaining $100 million in bond money.

“I would always challenge us to make sure we’re giving access to every nook and cranny in this county because when they get sick ... we see them eventually and it’s a lot more expensive,” Baker told the Public Health Trust.

For now, however, the focus of the bond spending remains on maintaining Jackson’s share of the current healthcare market as well as building new facilities and adding services to the Jackson hospital network that could generate additional revenue.

Matt Pinzur, vice president of marketing, said Jackson has allocated nearly all of the bond money already because the hospital network wants its new buildings constructed as soon as possible. He cited inflation on construction materials and labor, saying that the sooner Jackson builds the new facilities, the less expensive they will be.

“As long as the bond dollars are being used for the things the voters intended, the sooner you build it, the better,” Pinzur said.

While the rehabilitation center and Jackson West are expected to add insured-patient volume, many of the other projects from the bond proceeds are going to renovating existing spaces, which Jackson must do just to maintain or slightly grow its share of the competitive South Florida healthcare market, Pinzur said. It’s hard to attract paying patients to aging facilities, he added.

“It’s no different than a hotel or retail space doing renovations, even though it won’t immediately or drastically increase their sales,” Pinzur said.

Even if the economy stays strong, there are other challenges on the horizon, such as the uncertainty of federal healthcare policy.

In his memo to lawmakers, Migoya, the Jackson CEO, said the health system’s position as a safety net serving disproportionate numbers of acutely ill uninsured and under-insured patients leaves it “substantially exposed to even the most modest reductions in supplemental payments and Medicaid rates.”

“None of these revenue streams fully reimburse Jackson for the cost of its mission, but they provide just enough budget flexibility for us to continue providing a single high standard of care to all Miami-Dade residents,” he said.

Ben Conarck is a reporter covering healthcare at the Miami Herald, which he joined in August 2019. He was previously an investigative reporter covering criminal justice at The Florida Times-Union. In 2018, he and reporter Topher Sanders recieved Columbia University’s Paul Tobenkin award for outstanding reporting on race and the University of Colorado’s Al Nakkula award for outstanding police reporting for their multi-part investigation “Walking While Black.” Conarck has also extensively covered the Florida prison system.